TaxTMI 
TaxTMI 
2015 (9) TMI 256
X X X X Extracts X X X X
X X X X Extracts X X X X
.... run a brick kilns and are engaged in the business of manufacture and sale of bricks. The U.P. Value Added Tax Act, 2008 (hereinafter referred to as the "Act") came into force w.e.f. 1.1.2008. It repealed the U.P. Trade Tax Act 1948. Chapter IV of the Act provides for assessment, payment, recovery and collection of tax. Section 26 under this Chapter provides for assessment of tax for an assessment year. Section 28 provides for assessment of tax after examination of records. Section 6 falling under Chapter II provides for an alternate method of assessment, termed as composition of tax liability. 3. For the sake of convenience the provisions of Section 6, 26 and 28 of the Act are extracted below: 6. Composition of tax liability.- (1) Notwithstanding anything contained in any other provision of this Act, but subject to other provisions of this section and the directions of the State Government, the assessing authority may agree to accept a composition money either in lump sum or at an agreed rate on his turnover of sale in lieu of tax that may be payable by a dealer in respect of such goods or class of goods and for such period as may be agreed upon: Provided that in the case of a....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of input tax credit admissible to him: Provided that where the dealer has carried on business during a part of the assessment year, such assessment shall be for such part of the assessment year: Provided further that in case of person who being a dealer other than a registered dealer brings any taxable goods from outside the State, the assessing authority may make separate assessments for each receipt of such goods by the dealer 28. Assessment of tax after examination of Records.- (1) In following types of cases or dealers, the assessing authority, after detailed examination of books, accounts and documents kept by the dealer in relation to his business and other relevant records, if any, and after making such inquiry as it may deem fit, subject to provision of sub-section (9), shall pass an assessment order for an assessment year in the manner provided in this section: - (a) in cases of such dealers as are specified or selected for tax audit by the Commissioner or any other officer, not below the rank of a Joint Commissioner, authorized by the Commissioner in this behalf; in such manner and within such time as may be prescribed. (b) in case of a dealer falling in any of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y be, are to be made to the best of the judgment of the assessing authority. (4) The show cause notice referred to in sub-section (3) shall contain all such reasons on which the assessing authority has formed its opinion about incorrectness of the turnover of sale or purchase or both, as the case may be, amount of tax, amount of input tax credit or amount of reverse input tax credit: (5) Order of assessment shall be in writing and copy of assessment order alongwith prescribed notice of demand of the balance amount of tax, if any, to be deposited by the dealer, shall be served on the dealer. (6) Dealer shall deposit amount of tax assessed in excess of amount of tax deposited by him for the assessment year, within a period of thirty days after the date of service of the assessment order and notice of demand. (7) Where the amount of tax deposited by the dealer is found in excess of tax assessed, the same shall be refunded to the dealer according to the provisions of this Act. (8) Assessing authority shall not be precluded from making assessment order under this section on the ground of passing of any provisional assessment order in respect of any tax period under section 25 and s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ority was proposing to make an assessment. It was at this stage, the petitioner being aggrieved has filed the present Writ Petition challenging the orders rejecting the compounding applications as well as the earlier orders of regular assessment. They have also prayed that the compounding scheme be declared ultra vires. 7. Thus the issues that arises for consideration in this bunch of writ petitions are as under: I. Whether in the facts and circumstances of the case the writ petitions challenging constitutionality validity of the compounding scheme dated 9.6.2009 for the season 1.1.2008 to 30.9.2008 are maintainable? II. Whether under the facts and circumstances the compounding for part of the season i.e.1.1.2008 to 31.3.2008 in respect of which regular assessment orders were already passed, can be accepted? III. Whether compounding applications for part of the season from 1.4.2008 to 30.9.2008 may be accepted despite the fact that the compounding under Section 6 of the Act was offered by the State Government for a fixed period from 1.1.2008 to 30.9.2008 and for a fixed lump sum amount for the said period/season? 8. We have heard Sri Suyash Agarwal, the learned counsel for the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t of the scheme be provided to them for part of the period. Law does not permit a person to approbate and reprobate simultaneously. Petitioner can not accept and reject the same instrument i.e. the compounding scheme dated 9.6.2009. They can not urge on one hand that the scheme is valid to obtain some advantage to which they could be entitled only on the footing that it is valid and then turn round and say that it is void. The impugned compounding scheme is in fact a policy decision of the State Government. 12. It is well settled that the Courts, in exercise of their power of judicial review did not ordinarily interfere with the policy decisions of the executive unless the policy can be faulted on account of malafide, unreasonableness, arbitrariness or unfairness etc. Petitioners have not argued that the policy i.e. the compounding scheme is hit by any of these grounds. If the policy cannot be faulted on any of these grounds, the policy cannot be said to be invalid. Courts cannot question the wisdom of the government in taking a policy decision. Generally, policy cannot be tested in a court of law. The government is entitled to lay down its policy which cannot be subjected to judi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cal, are vastly similar. On the question of the constitutional validity of Sub- Section 6 of Section 17 the same argument was advanced before this Court in the State of Kerala v. Builders Association of India (1997) 2 SCC 183. In that case, the High Court had declared as unconstitutional Sub- Section (7) and (7A) of Section 7 upholding the contention that they sought to levy tax at the rate of 2% on the whole amount of the contract, or at a particular rate applied to the entire value of contract, and not merely upon the value of goods transferred in the course of execution of the works contract as contemplated under Sub-clause (b) of Clause (29-A) of Article 366. The court noticed that the goods which were transferred in the course of execution of works contract may be "declared goods", liable to be taxed under the Central Sales Tax Act, 1956. The goods so transferred may also be taxable under different Schedules to the Kerala Act which prescribe different rates. In such a situation levy of tax on entire value of the contract meant levy of tax contrary to the provisions of the Central Sales Tax Act and the Kerala General Sales Tax Act. It also meant including the non- taxable compo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t be remembered that the method of taxation introduced by Sub-sections (7) and (7-A) is in the nature of composition of tax payable under Section 5(1)(iv). The impugned sub-sections have evolved a convenient, hassle-free and simple method of assessment just as the system of levy of entertainment tax on the gross collection capacity of the cinema theatres. By opting to this alternate method, the contactor saves himself the botheration of book-keeping, assessment, appeals and all that it means. It is not necessary to enquire and determine the extent or value of goods which have been transferred in the course of execution of a works contract, the rate applicable to them and so on. For example, under Sub-section (7), the contractor pays two per cent of the total value of the contract by way of tax and he is done with all the above-mentioned botheration. The rate of two per cent prescribed by Sub-section (7) is far lower than the rates in Schedules 1,2 and 5 referred to in Section 5(1)(iv)(a). In short, Sub-section (7) and (7-A) evolve a rough and ready method of assessment of tax and leave it to the contractor either to opt for it or be governed by the normal method. It is only an alte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nto effect in the year 1988 and continued till the year 1996. The appellants had taken benefit of the said scheme of composition by exercising their option for assessment under the composition scheme. They had therefore opted for something different from what is sought to be given to them under the amended provision which levies tax not merely on the value of goods transferred but on the whole amount of the contract. He, therefore, submitted that having regard to the legislative background. amendment of Sub-section 6 of Section 17 with retrospective effect by Act 7 of 1997 is clearly unconstitutional. The submission has no force. If the Legislature has legislative competence to enact a statute and the statute so enacted does not breach any constitutional provision, the same cannot be said to be unconstitutional merely because it is retrospective in operation. Moreover, in the instant case as explained in State of Kerala v. Builders Association of India (supra) the appellants had opted for assessment under the composition scheme. They were not compelled to exercise their option and otherwise they would have assessed in accordance with the provisions of the Act particularly Section 5....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a peculiar situation some included in a class get and advantage over others, so long as they are not singled out for special treatment. [See: Khandige Sham Bhat v. Agricultural I.T.O. AIR 1963 SC 591] 21. Since in the present case we are dealing with a taxation measure it is necessary to point out that in the field of taxation the decisions of this Court have permitted the legislature to exercise an extremely wide discretion in classifying items for tax purposes, so long as it refrains from clear and hostile discrimination against particular persons or classes. (See: East India Tobacco Co. V. State of A.P., (1963) 1 scr 404, P.M. Ashwathanarayanan Shetty v. State of karnataka, 1989 Supp (1)SCC 696, Federation of Hotel & Restaurant Association of India v. Union of India, 1989 3 SCC 634, Kerala Hotel & Restaurant Association v. State of Kerala (1990)2 SCC 502 and Gannon Dunkerley and Co. v. State of Rajasthan, (1993)1 SCC 364]. 22 Reference, in this context, may also be made to the decision of the U.S. Supreme Court in San Antonio Independent School District v. Bodrigues, wherein Justice Stewart, speaking for the majority has observed : "No scheme of taxation, whether the tax is i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Collector (Collection), Sales Tax, Allahabad & Others 1992, U.P.T.C. 1161 similar view was again taken. 21. It is settled law that in interpreting a taxing statute, equitable consideration are entirely out of place nor can a taxing statute be interpreted on any assumptions or presumptions. The Court must strictly construe the words of the statute and interpret them literally. It must interpret a taxing statute in the light of what is clearly expressed. It can not imply anything which is not expressed, it can not import provisions from the statutes so as to suffer any assumed deficiency. 22. Thus it is not open for the assessing authority either to bifurcate the period of the season or the lump sum amount under the scheme unless the assessing authority is permitted to do so under the scheme itself or under Section 6 of the Act. In the absence of any such direction or power, the assessing authority committed no error in rejecting the compounding application of the petitioners. In view of the above discussions, neither the petitioners have any right to claim for composition under the scheme dated 9.6.2009 for part of the season nor the assessing authority has power to accept the com....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... others 2003, U.P.T.C., 1272 and held that it is only when both sides are agreeable then only an agreement of compensation can be entered into between the parties. (emphasis supplied by us) 25. In the case of M/s. Bhadauria Gram Sewa Sansthan, Fatehpur Vs. Assistant Commissioner, Sales Tax, Allahabad and others 2006, U.P.T.C. 538, the full Bench of this Court held that the amount payable under the compensation scheme is not relatable to any actual turnover but depends upon the agreement under the scheme at the option of the dealer. 26. In view of the above discussions, we are clearly of the view that the composition scheme under Section 6 of the Act dated 9.6.2009 could be opted by an assessee/dealer for the season on terms and condition as provided by the scheme itself. The jurisdiction of the assessing authority is confined to accept only such compounding applications which are in accordance with the direction of the scheme. He can neither travel beyond the directions of the scheme and the provisions of Section 6(1) of the Act nor has power either to bifurcate the period of the season or the lump sum amount unless it is so provided under the scheme. Option exercised by an asse....